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Distribution wins return sales online

Simon Evans (via AFR) | July 16, 2013
Online retailers are building glittering websites as they attempt to claw away a higher share of the $225 billion spent by Australian consumers in the retail sector each year.

He won't comment on when The Iconic expects to be profitable but does say it will be faster than the average seven years it takes for a start-up online business.

The Iconic uses Australia Post for deliveries in Australia, and for the three-hour Sydney deliveries it uses the "Want It Now" brand operated by a firm called Mail Call. It uses DHL Express for deliveries to New Zealand.

Jacobs say Australia Post is an important component. "We've had a lot of success with Australia Post."

Richard Umbers, executive general manager Parcel & Express Services at Australia Post, acknowledges that his business has an important role to play in the overall success of online retailing in Australia. "We have been investing heavily in our business and we are spending $1.2 billion on our network, to provide the infrastructure required by our new customer base," he says.

Umbers says around 70 per cent of parcels delivered by Australia Post ­originate from an online transaction.

Parcel volumes are experiencing double-digit growth and this has been the case for the past three years.

PARCELS REVENUE LARGER THAN LETTERS'
The revenue from parcels is now larger than the letters business.

Australia Post moved to full ownership of parcel delivery business Star Track Express last year by buying out Qantas's 50 per cent stake for $408 million as part of a strategy of beefing up its parcels business.

Crackawines.com.au, the No. 2 player in Australia's online wine retailing market, is using Australia Post for its deliveries, largely because of the sheer size of its geographic reach. In its infancy, Cracka's growth was curtailed because of logistics issues.

"There's very few people who have the reach of Australia Post," says Dean Taylor, the chief executive and co-founder of Cracka.

He says global giants like Amazon and the Book Depository have set high benchmarks for how fast an item can be delivered, and customers in Australia can't understand why, if an item is being sourced from an Australian warehouse or business, it can't be delivered faster than from overseas.

Taylor says Cracka, established in October, 2010, is still in an investment phase and building its scale.

"We're very close to profitability," he says. "We're still re-investing. For us it's getting it to the scale that we want to be," he says.

Lower pricing than a bricks and mortar retailer is important in attracting customers.

"People expect that by buying online they're actually going to save money."

CONSTANT DOWNWARD PRESSURE
There is constant downward pressure being brought on the margins of shop retailers and "the internet is starting to break them down".

But it's in the delivery where customers become loyal, or a business runs the risk of them switching to a rival and never returning.

 

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